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Topeka  Money, money, money. That will be the main issue of the 2009 legislative session that starts in January.

During the past few years, lawmakers have increased education funding to satisfy the Kansas Constitution and cut taxes to satisfy business lobbyists.

Now an economic recession has pushed the spending increases and tax cuts toward a collision at the bottom line.

State budget experts said unless adjustments are made, the current 2009 fiscal year, ending June 30, will wind up with a $140 million deficit. Then another big deficit — upward of $1 billion — looms for the 2010 fiscal year that starts July 1.

‘A painful period’

The somber fiscal picture was brought into sharp focus in November when state budget experts reduced revenue projections.

“The economy overall has taken a significant turn for the worse,” said Alan Conroy, director of the Legislative Research Department.

Earlier in 2008, farmers were enjoying high grain prices, but the recession settled in the state’s anchor aviation industry, hit by huge layoffs.

House Speaker Melvin Neufeld, R-Ingalls, said at a recent meeting, “It’s a serious position we are in. This is a painful period for all of us.”

Gov. Kathleen Sebelius has said she will provide lawmakers balanced budget plans for both fiscal years when the legislative session starts Jan. 12.

“We hope that the ’09 (fiscal year) decisions are made very quickly. Really, the agencies have been implementing budget cuts since the first of July when they were put on notice by me that our revenue estimates were going to be adjusted downward,” Sebelius said.

How closely lawmakers follow Sebelius’ lead remains to be seen. Budgets are about priorities, and it’s a given that the Republican-dominated Legislature has different priorities from Sebelius, a Democrat.

Cuts already surfacing

Sebelius has already rejected across-the-board cuts and has said she wants to protect funding for public schools and social services. But with those areas of the budget making up two-thirds of the state budget, many in state government are questioning whether that can be accomplished.

“What I have done is make budget decisions, agency by agency, program by program,” Sebelius said.

So far, the signs of financial distress have become apparent in various ways. Social services have announced freezes in certain programs, letting of highway contracts has been put on hold, and the government employee pension system announced record losses.

Newly appointed House Appropriations Committee Chairman Kevin Yoder, R-Overland Park, summed up the budget situation, saying, “Our role will be to try to sort out which choice causes the least amount of pain.”

In addition to tax revenue problems, a potential revenue source — casino gambling — has fallen far short of predictions made when the law was passed in 2007 to allow four casinos.

Back then, supporters of expanded gambling said the casinos would bring in $200 million in annual revenue. But financial problems have collapsed casino plans like a house of cards.

Added to this tight budget year are the political dynamics that affect every session.

In 2009, the House will be under new management, while party warfare is expected to continue among Senate Republicans.

Republicans, who hold a 77-48 advantage in the House, deposed their leader — Speaker Neufeld — for state Rep. Mike O’Neal, R-Hutchinson.

Criticism of Neufeld came from several directions. Some thought he was too controlling, while some blamed him for failing to stop passage of expanded gambling and failing to override Sebelius’ veto of bills that would have required construction of coal-fired power plants.

The House Democrats also have a new leader — state Rep. Paul Davis, D-Lawrence, who takes over from Dennis McKinney of Greensburg, whom Sebelius appointed state treasurer to replace Lynn Jenkins, who won election to the U.S. House of Representatives.

In the Senate, Republicans hold a 31-9 advantage, but so-called conservative Republicans challenged so-called moderate Senate President Steve Morris, R-Hugoton. The conservatives lost and saw several of their committee chair positions stripped away.